IEA Oil Market Report for June

According to the International Energy Agency’s oil market report for July, oil futures surged in mid-June to a nine-month high of more than US$ 115/bbl, as Islamist forces gained ground in Iraq.

However, these gains were later reversed on confidence that Baghdad’s southern fields would remain untouched. Brent last traded at US$ 108/bbl, West Texas Intermediate (WTI) at US$ 102/bbl.

OPEC supplies were virtually unchanged in June at 30.03 million bpd, as lower Iraqi production offset gains in Saudi Arabia, Iran, Nigeria and Angola. The ‘call’ on OPEC for the second half of 2014 was cut by 350 000 bpd to 30.6 million bpd on improved non-OPEC supply.

Non-OPEC supply is forecast to grow by 1.2 million bpd in 2015, down slightly on 2013 and 2014 forecast levels. Global supplies were largely unchanged month-on-month in June, at 92.6 million bpd, but 995 000 bpd higher than a year ago. Annual non-OPEC growth of 1.7 million bpd more than offset OPEC declines of 765 000 bpd.

According to the report, global oil demand is expected to accelerate to 1.4 million bpd in 2014 from 1.2 million bpd in 2014, as macroeconomic conditions improve. The estimate of 2014 demand has been trimmed by 130 000 bpd to 92.7 million bpd following weaker than expected mid-year economic data.

IEA reports that global refinery crude runs dipped below June 2013 levels for the first time since October. Planned and unplanned outages, capacity rationalization and weak margins cut runs by 0.9 million bpd on the year, to 76.8 million bpd. The second quarter 2014 estimate has been lowered by 0.3 million bpd to 76.2 million bpd, while the third quarter forecast is unchanged at 77.8 million bpd.

OECD commercial oil inventories are reported to have built more steeply than usual, from 44.2 million bbls in May, to 2638 million bbls. Their deficit to the five year average narrowed to 69.6 million bbls from a revised 106.1 million bbls at the end of April. Refined products covered 29 days of demand at the end of May, up 0.4 days on the month. Preliminary data shows that OECD stocks rose by 8.3 million bbls in June.